A disagreement between Toronto-based Acasta Enterprises Inc. and a hedge-fund manager that owns shares escalated sharply on Wednesday, with the two sides trading barbs over a proposed debt-to-equity swap and other allegations.
The spat first broke out into the open on Tuesday, when Anson Advisors Inc., a entity related to Anson Funds, a privately held alternative asset manager, issued a press release requesting the Toronto Stock Exchange require Acasta to get “disinterested shareholder approval” for a proposed transaction involving the company’s recently appointed co-CEOs.
On Wednesday morning, Acasta fired back, defending the transaction and accusing Anson of presenting information that was “not factual” and ”misleading.”
In its release, Acasta went further, alleging that Anson, “appears to have had access to confidential information about the Company which raises serious concerns for the Company as to whether Anson Funds traded in the Company’s securities while in possession of material undisclosed information.”
Acasta added it had “shared its concerns with the applicable regulators regarding possible insider trading by Anson Funds, as well as Anson Funds’ and its joint actors’ non-compliance with early warning reporting requirements.”
Following Acasta’s accusations, Anson said in another release on Wednesday that Acasta’s allegations were “untrue and are made as a tactical ploy in an effort to damage Anson’s credibility and deflect attention away from the fact” that the proposed debt conversion is not in the best interests of Acasta, among other things.
Anson specifically denied having “traded securities of Acasta while it was in possession of material non-public information.”
Anson said Tuesday that Acasta, once a high-flying special-purpose acquisition company, had been considering a sale of its remaining acquisition, Apollo Health and Beauty Care, before the sudden replacement of its board in December.
The change in leadership at Acasta followed a disagreement the previous directors had with Charles and Richard Wachsberg, who own approximately 36 per cent of Acasta and who co-founded Apollo. The Wachsbergs were appointed co-CEOs of Acasta in December by the new board.
A management’s discussion and analysis filed by Acasta in November said its board of directors was considering several possible alternatives to fund its working capital deficit over the coming year, including a sale of Apollo.
Resorting to threats … rather than addressing the merits of shareholders’ valid concerns about the conduct of Acasta’s business … does not reflect well on Acasta’s current governance
Anson claimed Tuesday that the terms proposed for a sale of Apollo would have provided enough cash to repay all of Acasta’s debt and value to stockholders of at least $1.48 per share.
The asset manager said the proposed price of the $4.8-million debt-to-equity conversion, at nearly 74 cents per share, is at “a significant discount to the current market price” and alleged the intent of the deal is “to transfer value from Acasta and its minority shareholders” to the Wachsbergs. Acasta’s share price finished Wednesday at 85 cents apiece.
The debt-conversion deal would give the Wachsbergs control of about 42 per cent of the company, which launched in 2015 with the backing of a number of prominent Canadian businesspeople. Acasta said last week that, subject to TSX approval, it expected the conversion to be completed on or after Feb. 18.
Toronto-based Anson says it owns or controls 18.7 per cent of Acasta.
Anson also alleged that Acasta had previously threatened to report it to regulators for “securities law breaches.”
“Resorting to threats of this nature rather than addressing the merits of shareholders’ valid concerns about the conduct of Acasta’s business since the Waschbergs took control of the board does not reflect well on Acasta’s current governance,” Anson’s Wednesday press release said.